CANADIAN methanol producer, Methanex, says it does not plan to retrench any workers at its Titan methanol plant on the Point Lisas Industrial Estate as a result of its decision to idle the plant indefinitely.
On March 16, Methanex announced it was idling the Titan plant immediately and that it would idle its Chile IV plant on April 1.
The company said it anticipated that methanol demand could be impacted in the second quarter of 2020, which starts on April 1, “as there has been a substantial reduction in manufacturing activity in countries that have had significant outbreaks of COVID-19”.
Methanex said as a result, it was reducing production at its methanol facilities, “where we have flexibility in our gas agreements, to prepare for lower demand for methanol”.
Responding to questions from Express Business, Methanex said: “Given the uncertainty in the global economy and challenging commodity price environment, we are taking steps to strengthen our balance sheet, while maintaining financial flexibility.
“One of these steps is reducing production at our methanol facilities where we have flexibility in our gas agreements, which includes our Titan plant in Trinidad. There are no plans for imminent staff reductions.”
Methanex operates two methanol plants at Point Lisas: It owns 100 per cent of Titan, which was commissioned in 1999 and has production capacity of 850,000 metric tonnes a year; And it owns 63.1 per cent of Atlas, which was commissioned in 2004 and has nameplate capacity of 1.7 million metric tonnes a year. British energy giant BP owns the balance of shares in Atlas.
Methanex’s five-year natural gas supply contract with the National Gas Company of T&T (NGC) expired on December 31, 2019 and the Vancouver-based company entered into an interim agreement with NGC for the supply of natural gas to Titan for the period from January 1, 2020 to January 31, 2020. That interim contract was extended to April 1.
Express Business was told that the two short-term contracts did not contain take-or-pay clauses that would have obliged Methanex to take a specified amount of natural gas from NGC for the term of the contract or pay for it. That explains the reference by Methanex to “flexibility in our gas agreement”.
But asked if it idled Titan to put pressure on NGC with regard to the new long-term, gas supply contract, Methanex said: “We are focused on continuing our discussions with NGC, and we will preserve the plant for a safe and efficient restart. We remain committed to doing business in Trinidad and Tobago.”
► NGC responds ◄ NGC responds
Express Business asked NGC whether, in the context of Methanex’s US$1.2 billion market capitalisation on March 13, it would consider making a takeover bid for the Canadian company. NGC responded that it “would not discuss publicly any discussions around its growth strategy”.
Asked if the ongoing natural gas supply negotiations between NGC and Methanex had anything to do with its decision to idle Titan, NGC said: “No, local negotiations are still in progress.”
As to whether NGC expects other operators on the Point Lisas estate to idle their plants, the local aggregator of natural gas said: “Each plant would make its own judgement based on changing market conditions.”
Qestioned on the impact that the closure of Titan would have on natural gas sales to Methanex, NGC said: “It will negatively impact sales as there will be less revenue being earned in the aggregator part of the business.”
And the Point Lisas-based company refused to disclose if it was given prior notice of the decision by Methanex to idle the Titan plant, saying only: “The decision is highly market sensitive and was handled professionally by Methanex.”
Methanex is the world’s largest producer of methanol, producing and supplying methanol to North America, the Asia Pacific, European, and South American markets.
Reporting its full-year 2019 financial results at the end of January, Methanex’s revenue declined by 29 per cent to US$2.78 billion from US$3.93 billion.
The methanol company’s net income attributable to its shareholders plummeted by 84.45 per cent to US$87.8 million from US$568.8 million.
The sharp decline in the Vancouver-based company’s profitability was partly due to the 27.2 per cent decline in its average realised price for methanol, which fell from US$405 per tonne in 2018 to US$295 per tonne in 2019.
The production of methanol attributed to the Methanex shareholders increased by 5.2 per cent to 7.58 million metric tonnes from 7.21 million metric tonnes.
In his comments in the mathanol company’s 2019 results, Methanex president John Floren said: “For the full year in 2019, we achieved record production results which was overshadowed by the impact of lower average realized pricing compared to 2018.
“We were very pleased to achieve production of 7.6 million tonnes of methanol in 2019, compared to 7.2 million tonnes in 2018, reflecting the significant improvement we have seen in our Chile production capability with both plants operating at high rates.
“These results reflect the investments we have made over the past few years to substantially increase our production capability and enhance our ability to service our customers.”
Methanex was trading at a market capitalisation of about US$740 million on Monday.